Order Code IB10107
Issue Brief for Congress
Received through the CRS Web
Clean Air Act Issues in the 108th Congress
Updated December 17, 2002
James E. McCarthy
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Issues in the 108th Congress
New Source Review (NSR)
Multi-Pollutant Legislation
MTBE
Conformity of Transportation Plans and SIPs
LEGISLATION
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
FOR ADDITIONAL READING

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Clean Air Act Issues in the 108th Congress
SUMMARY
Clean air issues were discussed at length
in numerous incidents of ground water con-
in the 107th Congress, but legislation was not
tamination, however, and 17 states have taken
enacted, leaving the same issues for possible
steps to ban or regulate its use. The most
consideration in the 108th. With new leader-
significant of these bans (in California and
ship in the Senate, the prospects for such
New York) take effect at the end of 2003,
legislation and its content are likely to change.
leading many to suggest that Congress revisit
Further, the Senate committee of jurisdiction
the issue before then to modify the oxygenate
(Environment and Public Works) will almost
requirement and set more uniform national
certainly focus first on consideration of high-
requirements regarding MTBE and its poten-
way and transit funding (the authorization for
tial replacements (principally ethanol).
which, known as TEA21, expires at the end of
FY 2003). Thus, although there is some inter-
A third clean air matter that might be
est in considering broad changes to the Clean
considered in the 108th Congress is the confor-
Air Act, the more immediate prospect is for
mity of metropolitan area transportation plans
targeted proposals that might be attached to
with the Clean Air Act. Under the act, federal
reauthorization of TEA21.
agencies are prohibited from funding most
highway or transit projects in areas that have
The most prominent air quality issue in
not attained any of the six National Ambient
recent months has been the controversy over
Air Quality Standards if the projects would
EPA’s proposed changes to the Clean Air
increase the frequency or severity of nonat-
Act’s New Source Review (NSR)
tainment or delay attainment of any standard.
requirements, which impose emission controls
The impact of conformity requirements is
on modifications of power plants and other
expected to grow in the next several years.
major facilities. Despite congressional inter-
The growth of emissions from SUVs and
est, NSR has not been the subject of legisla-
other light trucks and greater than expected
tion. The Administration has asked Congress
increases in vehicle miles traveled have both
to modify Clean Air Act requirements for
made it more difficult to demonstrate confor-
power plants, however, by enacting “multi-
mity; recent court decisions have tightened the
pollutant” legislation. The Environment and
conformity rules; and the scheduled imple-
Public Works Committee narrowly approved
mentation of more stringent air quality stan-
multi-pollutant legislation (S. 556) June 27,
dards in 2004 will mean that additional areas
2002; but the Administration and much of the
are subject to conformity requirements. Of
electric power industry opposed the bill, and it
particular concern to these areas may be the
did not reach the Senate floor.
fact that the Clean Air Act provides no author-
ity for waivers or grace periods, and, during a
A second holdover issue from previous
conformity lapse, only a limited set of exempt
Congresses concerns regulation of the gaso-
projects can be funded. Modifying conformity
line additive MTBE. MTBE is used to meet
would be controversial, however, since it
Clean Air Act requirements that gasoline sold
provides an effective tool for ensuring that
in the nation’s worst ozone nonattainment
transportation and air quality planning are
areas contain at least 2% oxygen, to improve
coordinated.
combustion. The additive has been implicated
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MOST RECENT DEVELOPMENTS
The 107th Congress did not pass major legislation amending the Clean Air Act. Of the
bills that might have amended the Act, H.R. 4, the comprehensive energy bill, came closest
to passage; however, it died in conference at the end of the Congress. The Senate version
of the bill would have banned use of the gasoline additive MTBE, eliminated the requirement
to use MTBE or other oxygenates in reformulated gasoline, authorized additional funding
for cleanup of ground water contaminated by the substance, and required that motor vehicle
fuel contain ethanol or other renewable fuels. The House bill contained only the ground
water cleanup provisions, not the ban on MTBE nor the provisions requiring the use of
ethanol.
Environmental Protection Agency (EPA) recommendations regarding the Clean Air
Act’s New Source Review (NSR) program were released November 22, 2002. Under the
Administration’s energy plan, announced in May 2001, EPA and the Justice Department had
been directed to review the impact on utilities and refineries of NSR and of recent
enforcement actions taken under its authority. The new NSR rules (some proposed and
others promulgated by EPA November 22) will make it easier for companies to modify their
facilities without installing new pollution controls. A separate Justice Department review
was released in January 2002; it concluded that EPA’s enforcement actions “are supported
by a reasonable basis in law and fact.” Many argue that the enforcement actions will be
undercut by the changes in the NSR regulations now being implemented by EPA.
BACKGROUND AND ANALYSIS
Despite steady improvements in air quality in many of the United States’ most polluted
cities, the goal of clean air continues to elude the nation: 107 areas with a combined
population of 97.8 million were classified as “nonattainment” for one or more of the National
Ambient Air Quality Standards (NAAQS) as of December 2002. Two pollutants account for
the vast majority of nonattainment areas: ozone – 36 areas with 85.5 million people – and
particulate matter (PM) – 61 areas with 24.9 million people. Thirty-nine areas with 18.4
million people have failed to achieve standards for carbon monoxide, sulfur dioxide, or lead.
The standards for these pollutants are health-based: the statute requires that EPA set
them at levels necessary to protect the public health with an adequate margin of safety, based
on a review of the scientific literature. From time to time (every 5 years according to the
statute, but less frequently in reality), the Agency reviews the latest scientific studies and
either reaffirms or modifies the standards. The most recent changes (a strengthening of the
ozone and PM standards) were promulgated in 1997. Due to legal challenges and other
delays, the new standards have not yet been implemented. When they are implemented (now
expected in 2004), they are likely to double the number of areas in nonattainment.
National Ambient Air Quality Standards drive many of the Clean Air Act’s programs.
The need to attain them sets in motion State Implementation Plans that establish detailed
requirements for sources of air pollution, including: the imposition of Reasonably Available
Control Technologies on stationary sources of pollution; the requirement that new sources
of pollution in nonattainment areas “offset” their emissions by reductions in pollution from
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other sources; the operation of inspection and maintenance programs for auto emission
controls; the requirement to use cleaner burning reformulated gasoline as a means of
reducing emissions; and the necessity of demonstrating that new highway and transit projects
“conform” to the State Implementation Plan for the area in which they will be constructed.
Other provisions of the Act are separate from the State Implementation Plans, and are
for the most part national in scope. These include emission standards for cars, trucks, and
other mobile sources of pollution; standards for new major sources of pollution; emission
standards for sources of hazardous air pollutants; standards for prevention of significant
deterioration in areas where air quality is better than the NAAQS; the acid rain and regional
haze programs; and stratospheric ozone provisions.
Issues in the 108th Congress
Several of the clean air issues facing the 108th Congress are holdovers that were
discussed at length, but not resolved, in the 107th. Changes to the Act’s reformulated
gasoline program, for example, including a ban on use of the gasoline additive MTBE,
reached a conference committee as part of the comprehensive energy bill (H.R. 4); and
legislation was reported on the regulation of emissions from electric power plants (S. 556).
Ultimately, neither bill was enacted, leaving these issues for possible consideration in the
108th. (For information on bills introduced and considered in the 107th Congress, see
IB10065, Clean Air Act Issues in the 107th Congress.)
When, and in what form, these issues might be resurrected is less certain. In the Senate,
the committee of jurisdiction for air issues (Environment and Public Works) is expected to
focus first on consideration of highway and transit funding (the authorization for which,
known as TEA21, expires at the end of FY2003). As a result, although some in the new
leadership have expressed an interest in considering broad changes to the Clean Air Act, the
more immediate prospect could be for targeted proposals that might be attached to
reauthorization of TEA21. In addition, with new leadership in the Senate, the specifics of
bills dealing with any of the holdover issues may change.
In the remainder of this Issue Brief, we look in more detail at four prominent air issues
that might be of interest in the new Congress: New Source Review, multi-pollutant
legislation, MTBE, and transportation conformity.
New Source Review (NSR). The most prominent air quality issue in recent months
has been whether to modify the Clean Air Act’s New Source Review requirements. EPA
proposed and promulgated several changes to these rules in November 2002, the net effect
of which will be to allow modification of some existing major sources of air pollution
without subjecting them to new emission standards.
The controversy over the NSR process stems from EPA’s application of New Source
Performance Standards to existing stationary sources of air pollution that have been
modified. In Section 111, the Clean Air Act states that new sources (subject to NSR) include
modifications of existing sources as well as plants that are totally new. Industry has
generally avoided the NSR process, however, by claiming that changes to existing sources
were “routine maintenance” rather than modifications. In the 1990s, EPA began reviewing
records of electric utilities, petroleum refineries, and other industries to determine whether
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the changes were routine. As a result of these reviews, since late 1999, EPA and the
Department of Justice have filed suit against 14 electric utilities, claiming that they made
major modifications to 53 units in 14 states, extending their lives and increasing their electric
generating capacity without undergoing required New Source Reviews and without installing
best available pollution controls. With one exception, these suits were filed by the Clinton
Administration.
Two of the 14 utilities charged with NSR violations (Tampa Electric and PSEG of New
Jersey) have settled with EPA, agreeing to spend more than $1.3 billion over the next decade
on pollution controls or fuel switching in order to reduce emissions at their affected units.
Two other utilities (Virginia Power and Cinergy) reached agreement in principle more than
2 years ago to spend more than $1 billion each to resolve NSR violations, but final settlement
negotiations have not been concluded. A fifth utility, the Tennessee Valley Authority, has
announced plans to spend $1.5 billion to reduce emissions at four of its plants, although not
as part of a settlement agreement. Between July 25, 2000 and December 20, 2001, the
Agency also reached agreement with nine petroleum refiners representing more than 30%
of industry capacity. The refiners agreed to settle potential charges of NSR violations by
paying fines and installing equipment to eliminate 153,000 tons of pollution.
Most of the utilities have not settled with EPA. They and other critics of the Agency’s
enforcement actions claim that EPA reinvented the rules. A strict interpretation of what
constitutes routine maintenance, they contend, will prevent them from making changes that
were previously allowed, without a commitment of time and money for permit reviews and
the installation of expensive pollution control equipment. This provides disincentives for
power producers, refineries, and others to expand output at existing facilities, they maintain.
NSR rules have been under review by the Administration since the May 2001 release
of the President’s energy plan. In the plan, EPA was charged with undertaking a review of
NSR, with the EPA Administrator to report to the President regarding the impact of NSR
regulations on investment in new utility and refinery generation capacity, energy efficiency,
and environmental protection. The review was concluded in June 2002, and regulatory
changes were promulgated and proposed November 22, 2002.
EPA promulgated four sets of changes to NSR. First, it will allow facilities to use
Plantwide Applicability Limits, rather than emissions from the individual units being
replaced, to determine whether emissions will increase from a plant modification (this is
expected to make it easier to modify facilities without triggering NSR). Second, certain
environmentally beneficial pollution control and prevention projects will be allowed to
proceed without NSR permits, upon submission of a notice to the permitting authority.
Third, plants that install state-of-the-art pollution controls (referred to as “clean units”) will
be allowed to modify their facilities during the ensuing 10 years without undergoing further
review, provided they meet emission limits specified in their permit. And fourth, the
methodology used to calculate whether emissions will increase (triggering NSR) will be
changed—for example, facilities other than power plants will be able to compare projected
emissions after a modification to the highest emission levels reached during any 24-month
period during the previous 10 years.
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In addition to the four promulgated changes, the Agency also proposed new regulations
defining what constitutes routine maintenance, which is exempt from review. The proposal
would exempt from NSR modifications that cost less than threshold amounts.
The proposed and promulgated changes have been characterized by the Administration
as streamlining or improvement of the program, and by environmental groups and a number
of states as a significant weakening. They are almost certain to trigger litigation, with
enforcement of NSR blocked for the immediate future. In the meantime, the prospect of an
NSR rollback, critics argue, has already caused utilities to withdraw from settlement
negotiations over the pending lawsuits, delaying emission reductions that could have been
achieved in the near future. (For additional discussion of NSR issues, see CRS Report
RL30432, Air Quality and Electricity: Enforcing New Source Review.)
Despite congressional interest, including hearings in the 107th Congress, NSR has not
been the subject of legislation.
Multi-Pollutant Legislation. In addition to the regulatory changes in NSR, the
Administration has also asked Congress to modify Clean Air Act requirements for power
plants by enacting “multi-pollutant” legislation. A number of multi-pollutant bills were
introduced in the 107th Congress. Depending on the bill’s author, such legislation comes in
3- or 4-pollutant versions. The 3-pollutant bills would set standards for sulfur dioxide,
nitrogen oxides, and mercury. The 4-pollutant bills add carbon dioxide to the mix.
Such legislation, it is argued—whether in 3- or 4-pollutant form—would both reduce
emissions and encourage investment in new plants by providing certainty regarding future
regulatory requirements. In some proposed bills, it would replace numerous existing
regulatory programs, including NSR, New Source Performance Standards, Prevention of
Significant Deterioration, Lowest Achievable Emission Rate standards, Best Available
Retrofit Technology, and regulations under development to control mercury emissions from
electric utilities.
The number of these current and prospective regulations on power plant emissions has
suggested to many in industry, environmental groups, Congress, and the Administration that
the time is ripe for such comprehensive legislation. The key questions are how stringent the
controls will be, and whether carbon dioxide (CO ) will be among the emissions subject to
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controls.
Regarding the stringency issue, several bills introduced early in the last Congress would
have required reduction of NOx emissions to 1.5 or 1.6 million tons per year (a nearly 80%
reduction from 1998 levels) and reduction of sulfur dioxide emissions to 2.23 - 4.45 million
tons per year (a reduction of roughly 65% - 80% versus 1998). Regarding mercury, the bills
would have either required EPA to determine the level of reductions, or required about a
90% reduction from current levels of emissions (from 48 to 4.5 or 5 tons annually). In
general, these reductions would have taken place by 2005 or 2008, depending on the bill.
Three of the bills would also have set caps on CO emissions, at the level emitted in 1990.
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(For additional information and a detailed comparison of the legislative proposals, see CRS
Report RL31326, Air Quality: Multi-Pollutant Legislation.)
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The Administration’s “Clear Skies” bill, which was not introduced until late in the
second session of the 107th Congress, envisions less stringent standards than those in the
other bills, phased in over a longer period of time. For NOx, the Administration would
reduce emissions to 1.7 million tons per year by 2018, with an intermediate limit of 2.1
million tons in 2008. For sulfur dioxide, the limit would be 3.0 million tons annually in
2018, with an intermediate limit of 4.5 million tons in 2008. For mercury, the limit would
be 26 tons per year in 2010, declining to 15 tons in 2018. “Clear Skies” and most of the
other bills envision a system like that used in the acid rain program, where national or
regional caps on emissions are implemented through a system of tradeable allowances.
The Administration opposes controls on CO , viewing them as a step towards
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implementing the Kyoto Protocol to the United Nations Framework Convention on Climate
Change, which it opposes. The absence of CO from the mix leads to different strategies for
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achieving compliance, preserving more of a market for coal, and lessening the degree to
which power producers might switch to natural gas or renewable fuels as a compliance
strategy.
Four hearings on multi-pollutant legislation were held by the Senate Environment and
Public Works Committee in the 107th Congress, and the Committee narrowly approved
Senator Jeffords’ 4-pollutant bill, with amendments, June 27, 2002 (S. 556, S.Rept. 107-
347). Opposed by the Administration and by the electric utility and coal industries, the bill
died without reaching the Senate floor.
In addition to the Jeffords bill and the other bills discussed above, Senator Carper
introduced legislation late in the second session that was described as an effort to reach
middle ground. The Carper bill would have regulated CO as well as the other three
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pollutants, but its deadlines and the required reductions in emissions fell somewhere between
the Jeffords bill and the Administration’s Clear Skies proposal. (The Carper bill is also
discussed in CRS Report RL31326. For additional information on regulation of electric
utility emissions, see CRS Report RS20553, Air Quality and Electricity: Initiatives to
Increase Pollution Controls.)
MTBE. Another holdover issue from previous Congresses concerns regulation of the
gasoline additive MTBE (methyl tertiary butyl ether). MTBE is used to meet Clean Air Act
requirements that reformulated gasoline (RFG), sold in the nation’s worst ozone
nonattainment areas, contain at least 2% oxygen, to improve combustion. Under the RFG
program, areas with “severe” or “extreme” ozone pollution (82 counties with a combined
population of 55 million) must use reformulated gas; areas with less severe ozone pollution
may opt into the program as well, and many have. In all, portions of 17 states and the
District of Columbia use RFG, and about 30% of the gasoline sold in the United States is
RFG.
The law requires that RFG contain at least 2% oxygen by weight. Refiners can meet
this requirement by adding a number of ethers or alcohols, any of which contains oxygen and
other elements. By far the most commonly used oxygenate is MTBE. In 1999, 87% of RFG
contained MTBE, a number since reduced to about 70%. MTBE has also been used since
the late 1970s in non-reformulated gasoline, as an octane enhancer, at lower concentrations.
As a result, gasoline with MTBE has been used virtually everywhere in the United States,
whether or not an area has been subject to RFG requirements.
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MTBE leaks, generally from underground gasoline storage tanks, have been implicated
in numerous incidents of ground water contamination. The substance creates taste and odor
problems in water at very low concentrations, and some animal studies indicate it may pose
a potential cancer risk to humans. For these reasons, 17 states have taken steps to ban or
regulate its use. The most significant of the bans (in California and New York) take effect
at the end of 2003, leading many to suggest that Congress revisit the issue before then to
modify the oxygenate requirement and set more uniform national requirements regarding
MTBE and its potential replacements (principally ethanol).
Support for eliminating the oxygen requirement on a nationwide basis is widespread
among environmental groups, the petroleum industry, and states. In general, these groups
have concluded that gasoline can meet the same low emission performance standards as RFG
without the use of oxygenates. But a potential obstacle to enacting legislation to remove the
oxygen requirement lies among agricultural interests. About 6% of the nation’s corn crop
is used to produce the competing oxygenate, ethanol. If MTBE use is reduced or phased out,
but the oxygen requirement remains in effect, ethanol use would soar, increasing demand for
corn. (In fact, ethanol use is already growing as MTBE begins to be phased out.) Conversely,
if the oxygen requirement is waived by EPA or legislation, not only would MTBE use
decline, but so, likely, would demand for ethanol. Thus, Members of Congress and
Governors from corn-growing states have taken a keen interest in MTBE legislation. Unless
their interests are addressed, they could pose a potent obstacle to its passage.
In the 107th Congress, Senate-passed legislation (the Senate version of the
comprehensive energy bill, H.R. 4) would have banned the use of MTBE in gasoline within
4 years, eliminated the 2% oxygen requirement, preserved and in some cases enhanced the
emission reductions achieved by reformulated gasoline, provided additional authority to EPA
to regulate fuel additives, and required a tripling of the use of ethanol or other renewable
fuels in motor vehicles by 2012. The bill also authorized funding to clean up MTBE leaks
from tanks, to oversee and enforce tank leak prevention and detection regulations, and for
grants to assist conversion of merchant MTBE production facilities to production of cleaner
fuel additives. The conferees on H.R. 4 did not reach agreement before the 107th Congress
adjourned.
As the deadlines for state phaseout of MTBE move closer, investment decisions
involving hundreds of millions of dollars hang on the regulatory framework of the post-
MTBE gasoline market. Thus, pressure for congressional action on this issue is likely to
remain high. Whether this pressure will produce enacted legislation is less clear. (For
additional discussion of the MTBE issue, see CRS Report 98-290, MTBE in Gasoline: Clean
Air and Drinking Water Issues. For information on ethanol, see CRS Report RL30369, Fuel
Ethanol: Background and Public Policy Issues.)
Conformity of Transportation Plans and SIPs. A fourth clean air issue that
might be considered in the 108th Congress is the conformity of metropolitan area
transportation plans with the Clean Air Act. Under the Act, areas that have not attained any
of the six National Ambient Air Quality Standards must develop State Implementation Plans
(SIPs) demonstrating how they will reach attainment. As of December 2002, 107 areas with
a combined population of 97.8 million people were subject to the SIP requirements. Section
176 of the Clean Air Act prohibits federal agencies from funding projects in these areas
unless they “conform” to the SIPs. Specifically, projects must not “cause or contribute to any
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new violation of any standard,” “increase the frequency or severity of any existing violation,”
or “delay timely attainment of any standard.” Because new highways generally lead to an
increase in vehicle miles traveled and related emissions, both the statute and regulations
require that an area’s Transportation Improvement Program (TIP), which identifies major
highway and transit projects an area will undertake, obtain a new demonstration of
conformity no less frequently than every 3 years. Highway and transit projects cannot
receive federal funds unless they are part of a conforming TIP.
The impact of conformity requirements is expected to grow in the next several years for
several reasons. The growth of emissions from SUVs and other light trucks and greater than
expected increases in vehicle miles traveled have both made it more difficult to demonstrate
conformity; recent court decisions have tightened the conformity rules; and the scheduled
implementation of more stringent air quality standards in 2004 will mean that additional
areas are subject to conformity. Thus, numerous metropolitan areas will face a cutoff of
highway and transit funds unless they impose sharp reductions in vehicle and industrial
emissions.
Of particular concern to these areas may be the fact that the Clean Air Act provides no
authority for waivers or grace periods once conformity lapses. During such a lapse, only a
limited set of exempt projects (mostly safety-related or replacement and repair of existing
transit facilities) can be funded: the rules do not even allow funding of new projects that
might reduce emissions, such as new transit lines. These limitations are among the issues
that may be raised by those seeking to amend the conformity provisions. Modifying
conformity would be controversial, however, since it provides one of the most effective tools
for ensuring that transportation and air quality planning are coordinated.
LEGISLATION
For legislation introduced in the 107th Congress, see CRS Issue Brief IB10065, Clean
Air Act Issues in the 107th Congress.
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
For congressional hearings, reports, and documents during the 107th Congress, see CRS
Issue Brief IB10065, Clean Air Act Issues in the 107th Congress.
FOR ADDITIONAL READING
CRS Report RL30432. Air Quality and Electricity: Enforcing New Source Review, by Larry
B. Parker and John E. Blodgett.
CRS Report RS20553. Air Quality and Electricity: Initiatives to Increase Pollution
Controls, by Larry B. Parker and John E. Blodgett.
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CRS Report 98-236. Air Quality: EPA’s Ozone Transport Rule, OTAG, and Section 126
Petitions — A Hazy Situation?, by Larry Parker and John Blodgett.
CRS Report RL31326. Air Quality: Multi-Pollutant Legislation, by Larry Parker and John
Blodgett.
CRS Report RL31515. Air Toxics: What Progress Has EPA Made in Regulating Hazardous
Air Pollutants? by Anne L. Hardenbergh.
CRS Report RL30853. Clean Air Act: A Summary of the Act and Its Major Requirements,
by James E. McCarthy.
CRS Report 97-458. Clean Air Permitting: Status of Implementation, by Claudia Copeland.
CRS Report RL30737. Diesel Fuel and Engines: An Analysis of EPA’s Proposed
Regulations, by Brent D. Yacobucci, James E. McCarthy, John W. Fischer, Alejandro
E. Segarra, and Lawrence C. Kumins.
CRS Report RL30878. Electricity Generation and Air Quality: Multi-Pollutant Strategies,
by Larry Parker and John Blodgett.
CRS Report RL30369. Fuel Ethanol: Background and Public Policy Issues, by Brent D.
Yacobucci and Jasper Womach.
CRS Report RL30131. Highway Fund Sanctions and Conformity Under the Clean Air Act,
by James E. McCarthy.
CRS Report 98-290. MTBE in Gasoline: Clean Air and Drinking Water Issues, by James
E. McCarthy and Mary Tiemann.
CRS Report RL31531. Particulate Matter Air Quality Standards: Background and Current
Developments, by Anne L. Hardenbergh.
CRS Report RL31149. Snowmobiles, Environmental Standards, and Access to National
Parks: Regulatory and Legislative Issues, by James E. McCarthy.
CRS Report RS20860. The Supreme Court Upholds EPA Standard-Setting Under the Clean
Air Act: Whitman v. American Trucking Ass’ns, by Robert Meltz and James E.
McCarthy.
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